Production and the Real Rate of Interest: A Sample Path Equilibrium

Posted: 13 Jan 2002  

David Feldman

Banking and Finance, UNSW Business School, UNSW Australia; Financial Research Network (FIRN)

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This paper examines a multiperiod production economy where investors do not observe the realizations of productivity factors or security expected returns. Unlike previous work, which expresses the equilibrium conditions as functions of unobservable (to both real-world investors and empiricists) moments of the distributions of returns, we express the equilibrium real rate as a function of the observable sample paths of realizations of returns. We provide a framework for empirically testing this and other asset pricing models without outside-the-model econometric assumptions needed for producing the unobservable moments of returns. We construct versions of the restrictions for any time interval between observations.

Keywords: incomplete information, equilibrium interest rates, asset pricing, sample path equilibrium

JEL Classification: E43, G12, D92, D80, D51

Suggested Citation

Feldman, David, Production and the Real Rate of Interest: A Sample Path Equilibrium. European Finance Review, Vol. 6, pp. 247-275, 2002. Available at SSRN:

David Feldman (Contact Author)

Banking and Finance, UNSW Business School, UNSW Australia ( email )

UNSW Sydney, NSW 2052
+61 2 9385 5748 (Phone)
+61 2 9385 6347 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane


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